A Bloomberg article notes that the top 10 richest tech tycoons in China have lost a combined net worth of $80 billion in 2021, highlighting the increased governmental scrutiny on the industry.
“The country’s 10 richest tech tycoons lost $80 billion in combined net worth in 2021, according to the Bloomberg Billionaires Index, amid widescale crackdowns by Chinese regulators,” the article says. “The drop represents almost a quarter of their total wealth and is the largest one-year decline since 2012, when the index started tracking the world’s richest people.”
Internet tycoons from companies like Alibaba, Tencent Holdings, and Baidu have all seen their wealth tumble thanks to increased regulations to curb monopolies. These moves could also tamp down foreign investor interest in these companies, further hurting the tech industry.
“Increased antitrust scrutiny from Chinese regulators has become increasingly common since the surprising halt of Ant Group Co.’s initial public offering last year,” the article says further. “Tech companies including Alibaba, Tencent Holdings Ltd., Meituan and Pinduoduo have seen their once lofty valuations trimmed after being fined for reasons ranging from monopolistic practices to disrupting market orders to under-reporting deals.”
It’s difficult to say whether China’s tech sector can come back from a forgettable 2021. The regulatory impact will weigh heavy on traders who are banking on a China tech bounce to the upside.
“The best days for China’s tech sector are behind us for now,” said Chen Zhiwu, director of the Asia Global Institute at the University of Hong Kong. “Without access to American capital markets, the history of China’s tech sector would have been very different.”
Tech Tycoons’ Woes Show in CWEB
The loss in net worth is reflected in the Direxion Daily CSI China Internet Bull 2X Shares (CWEB). The fund is down over 80% year-to-date.
CWEB seeks daily investment results equal to 200% of the daily performance of the CSI Overseas China Internet Index, which is designed to measure the performance of the investable universe of publicly traded China-based companies whose primary business or businesses are in the internet and internet-related sectors.
Bullish traders in tech have been better off staying in the United States, as reflected by the Direxion Daily Technology Bull 3X ETF (TECL). The fund seeks daily investment results that equal 300% of the daily performance of the Technology Select Sector Index, and the leverage shows with the fund up about 120% for the year.
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